Local banks in sound financial health, says MAS

Local banks in sound financial health, says MAS

SINGAPORE - Singapore's banks are in good health despite a move by Moody's Investors Service to downgrade the banking system's outlook on Monday.

The reassurance has come from the Monetary Authority of Singapore (MAS), which said on Tuesday that the local banks have strong financial positions and are "not at risk".

In fact, the Singapore banks have the highest average credit ratings among banking systems globally, MAS noted.

There has been some concern in the market after Moody's lowered Singapore's banking system outlook from "stable" to "negative" on Monday.

It said the local lenders - DBS, OCBC and UOB - could face more loan defaults as interest rates rise, particularly as household debt has risen more than 40 per cent since 2009.

In response to media queries on Tuesday, MAS said the local banks "continue to have strong financial positions by any serious assessment" and maintain capital levels well above globally prescribed standards.

It added that some borrowers may be at risk of being overstretched, especially when interest rates rise.

"However, the local banks are not at risk," MAS said. "They undertake regular stress tests... and have adequate buffers in place to cope with the inevitable upturn in the interest rate cycle."

MAS has been monitoring this and other risks over the last few years. It has also taken steps to address property market risks.

These include reducing loan limits and loan tenures for property loans, imposing tighter lending practices and monitoring banks' credit underwriting practices to ensure prudence.

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